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18.5.

2016

LBA 1

Agency

Agency applies in: Partnerships, Limited Partnerships and Limited Liability Partnerships. It is often where people use
agents acting on behalf of another, in order to conduct business.

General Partners: even where not expressly stated that one is the agent of the other- it will be deemed to be an
agency relationship.

LP: relationship b/w the silent partner and the managing partners: Managing Partner are the agents of the Silent
Partner because SP restricted to providing finance.

Describe the nature of an agency relationship?

Definition: Where one person (Agent) has authority to act on behalf of another (Principle) before a 3rd Party.

Agency relationship viewed as a contract. Is it unilateral, bilateral or tripartite? Principle, Agent and 3rd Party.

Principle obligation/liability *also depends on whether Principle is disclosed or


undisclosed*

Fiduciary relationship 3rd Party

Agent contract/tort

Undisclosed principle- loses benefits if 3P wants to contract with A directly. But A can also be personally liable. 3P
has the option to either sue the agent or undisclosed principle for specific performance or other redress.

Principle must authorise Agents actions, whether its exclusive or general. Types of authority:

Actual Authority: Impliedly: through conduct, based on the situations e.g. emergencies (agency by
necessity), previous dealings (customs), exercising usual authority.
or Expressly: in writing (e.g. power of attorney (contract via which a donor donates their authority to
another to transact on their behalf. It can be general or specific.), oral.
Ostensible or apparent authority (arises through estoppel)

Any statute that states that certain contracts must be reduced to writing is a statute dealing with fraud.

Difference between a deed and a contract? Deeds are registered and executed with the courts seal, must also be
delivered, while contracts just usually need signatures.

Agency by estoppel: to establish apparent authority you need to establish 3 things: demonstrate that As conduct is
misleading/ misrepresentation, causing the 3P to rely on the agent, and the principal hasnt intervened which results
in 3P suffering a loss or injury. Principal is estopped from denying that A was not his agent and had no authority.

3rd Parties must be notified if any partners have left. If the 3rd party continues contracting with the firm, but is under
the impression that the retired partner is still there, and 3rd party sues the retired partner, the RP can be personally
liable.

The Principle must always let clients know that the Agent no longer has any authority.

Restriction of Authority

Agency by Ratification

1. P must ratify the whole contract.


2. Ratification must be within a reasonable time.
3. P must have all the relevant facts.
4. P must have contractual capacity.

A doesnt need capacity if P has fully authorised him.

5. Contract must be lawful and enforceable.

Undisclosed Principle: their existence must be brought to the 3rd partys attention. Identity does not need to be
brought up.

General vs Specific Agency:

General: e.g. keeping a lawyer on retainer. He has the general authority to deal with all legal matters.

Specific: e.g. hiring a lawyer to handle one specific matter.

Difference b/w Factors and Brokers as Agents

Factors: taking moveable property to a middleman, and they have the authority to act on behalf of client. E.g. taking
your car to a dealership to be sold by them and theyll pass on the proceeds to you.

Brokers: unmovable property- the broker will advertise and vet people and bring the buyer to you on execution on
the completion date. They do not have capacity to contract on your behalf unless theyve been given express
authority.

Presumption: person in physical possession of the goods is assumed to have good title and capacity to pass it to the
buyer. It is up to the buyer to do his due diligence and ensure hes buying good goods.

Del credere agent example: underwriting (look it up for more details)

Agency by necessity: must be a true emergency, where it has been impossible to communicate with P for a new set
of instructions and action must be necessary.

Rights and Duties

In what situations is an Agent personally liable?

He expressly assumes personal liability to the 3rd party.


The trade/business he is in dictates he be deemed personally liable to the 3rd party: specific performance.
He signs a negotiable instrument e.g. promissory note, in his own name stating that he is doing so in his own
capacity. E.g. uncrossed cheques: back in the day which could be negotiated from one person to another.
Letters of credit etc. it is assumed that whoever has signed- automatically takes up the liability.
A purports to act for a non-existent Principle.
He acts in accordance with an Undisclosed Ps instructions, the 3rd party can choose whether to sue P or A.
A acts in breach or in excess of his authority.

Duties of an Agent (page 361):

Perform contract
Obey Ps lawful instructions
Exercise due diligence and care
No sub-delegation. Exceptions: P ratifies the sub-delegation, the act demanded by P needs that particular
expertise.
Maintain Ps accounts diligently.
Not to do anything averse to Ps title
Duty to not have conflicts of interest come up: in interests of fiduciary duties owed to P.
Not to make secret profits: appropriation of opportunities that belonged to P 1st.

They can both be cured through disclosure.


Duties of Principles: duty to pay for work done, and to indemnify/reimburse for any expenses or losses incurred by
the Agent.

Termination:

Act of the parties: when there is breach, and A renounces his authority, or when P revokes As authority. The parties
can also choose to terminate the contract through mutual agreement.

Exceptions to Ps revocation:

P cannot unilaterally revoke an authority where it is coupled with an interest held by the agent: a bank giving
a loan to a person who has given a rental property as collateral. The property owner is P, Bank is Agent and
the bank is collecting the rent from the property to pay off Ps loan. P cannot compromise or change the
rental property because that affects the Bank.
Where A has incurred personal liability in accordance to the contract.

Operation of Law: (page 364)

Performance/completion of contract/transaction.
Upon expiry of the fixed time period.
By the happening of a situation which renders the agency unlawful/unenforceable such as subsequently
illegal or destruction of the contract subject matter.
By the death, insanity or bankruptcy of one of the parties.